Starting January 1, it will be more challenging to borrow from multiple lenders.

The Reserve Bank of India (RBI) has introduced a new regulation that mandates banks and financial institutions to update credit records every 15 days, rather than the previous monthly schedule.

This change is designed to provide lenders with a more accurate view of your financial health, making it harder for borrowers to take on excessive debt through multiple loans.

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Until now, credit information was updated once a month by lenders, leaving a gap of up to 40 days before missed payments or new loans appeared in your credit score. However, starting with the new system, your financial activity will be updated every 15 days.

“This will give lenders a clearer, more timely picture of a borrower’s credit behaviour,” explained Sachin Seth, Chairman of CRIF High Mark, a credit information company, in a statement to The Times of India. He further noted that it will help eliminate delays in reflecting missed payments or defaults, improving the overall quality of credit evaluations.

Seth also added, “EMIs are scheduled at different dates throughout the month, and a monthly reporting system could delay recording defaults or payments for up to 40 days. A 15-day cycle ensures more accurate, real-time tracking.”

Why This Matters for Borrowers

For those who have taken multiple loans, keeping track of payments can be challenging. The frequent updates will now give lenders a real-time view of your financial activity. If someone borrows from multiple lenders, often exceeding their repayment capacity, the system will reflect their borrowing history much faster. This could reduce the chances of getting approved for new loans while older ones remain unpaid.

In an interview with The Times of India, SBI Chairman C S Setty raised concerns about the risks of over-borrowing, especially for new-to-credit borrowers who sometimes take on loans beyond their repayment ability. “This (the new system) will likely curb the tendency to borrow excessively,” Setty said.

A Step Towards Responsible Borrowing

The faster reporting system will also help address risky financial practices like ever-greening, where people take new loans to cover old defaults without the system detecting the issue. Shortening the reporting cycle will allow lenders to identify such behavior quickly and reduce the risk of bad loans.

What Borrowers Should Do?

With the new system, it’s even more important for borrowers to stay on top of repayments. A missed payment will now show up sooner in your credit report, which could impact your ability to borrow in the future. However, for those who consistently make timely payments, this update could work in your favor. Positive payment behavior will be reflected more quickly, helping boost your credit score.

Why It’s Good News for the Economy?

Frequent updates aren’t just beneficial for lenders. They also contribute to a healthier credit ecosystem. With more accurate data, banks can lend more responsibly, reducing the risk of defaults and fostering financial stability.

Many advanced economies around the world already use more frequent credit reporting, and by implementing this practice, India is aligning its financial system with global standards.

With borrowing becoming more transparent, both lenders and borrowers stand to gain. However, for anyone considering taking out loans in 2025, it’s crucial to be more vigilant about your financial commitments!